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TMI Blog2018 (12) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... 11-12, the revenue filed appeal on two issues. The first issue is related to the write off of debts under the Debt Waiver Scheme for an amount of Rs. 1,49,74,780/-. The second issue is related to the waiver of penal interest and other interests amounting to Rs. 2,39,84,671/- as expenditure u/s 31(1) of the Income Tax Act, 1961 (hereinafter called as 'Act') as per schemes announced by the APCOB and KBCCB. The first issue is involved only for the A.Y.2011-12, whereas the second issue with regard to waiver of penal interest and other interest as per the scheme announced by ACOB and KDCCB is involved for A.Ys 2011- 12, 2012-13, 2013-14 and 2014-15. 3. For the A.Y. 2011-12, the Assessing Officer (AO) has found that the assessee claimed the deduction for a sum of Rs. 1,49,74,780/- as it's share for additional relief for 25% OTS (One Time Settlement scheme) of 25% towards the Debt Waiver Scheme 2008(ADWDRS-2008). As per the audit report of the assessee has written off the said sum under the Agriculture Debt Wavier and Debt Relief Scheme (ADWDRS) of Govt. of India-2008. As per the ADWDRS- 2008, out of the loan waiver, principal and interest upto the date would be reimbursed by Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision made for loss in PV terms may be transferred to the General Reserves below the one. * As per clause 3.3. of the circular, the accounts subject to debt relief would stand classified as standard assets after receipt of the aforesaid Undertaking from the borrowers. Accordingly, such accounts would also attract the prudential provisioning as applicable to standard assets. * As per clause 3.5, the prudential provisions held in respect of the NPA accounts, for which the debt waiver has been granted, may be reckoned for meeting the provisions required on PV basis as well as for the standard assets (pursuant to classification of these loans as standard) and shortfall, if any, may be provided for, Thus, the total provisions held would comprise the provisions required on PV basis, provision for standard assets and excess prudential provisions, if any, towards NPA. * Clause 3.7 speaks of reversal of excess prudential provisions. In case the amount of the prudential NPA provisions held are larger than the aggregate of the provision required on PV (present value) basis and for the standard assets, such excess prudential provision to be reversed to P&L account when the entire ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. The Ld.CIT(A) followed the decision of the Coordinate Bench of ITAT, Hyderabad in the case of Nizamabad District Co-operative Central Bank Ltd. Vs. ITO, Wd-2, Hyderabad in I.T.A.No.906/H/2009-10 dated 10.12.2014. For the sake of clarity and convenience, we extract relevant part of the order of the Ld.CIT(A) which reads as under : 5.4. I have perused the details relating to ADWDRS, 2008 and the relevant circular of RBI in this regard. What was written off to the profit & loss account was the waiver in excess of the amount recoverable by appellant from the Government of India as per the ADWDRS- 2008 scheme and hence discussion of AO, in the assessment order on the nature of the amount recoverable from Govt, of India after waiver, has no bearing on the claim made by the appellant by debiting to its profit & loss account. In my view, as per applicable statutory provisions of the Income Tax Act, this expenditure is allowable on the ground that the waivers were actual and written off in the books of the appellant, appellant's claim for deduction of the same is in order. Reliance is placed on the decision of Hon'ble ITAT, Hyderabad in the case of Nizamabad District Cooperative Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the assessee also implemented the scheme. The additional waiver amounts have to be borne by waiving banks as per RBI Circular No.2009-10/137- dt.31.08.07. This is a reimbursement of part loan waiver by PACSs to farmer borrowers in addition to their entitlement of loan waiver as per ADWDRS-2008 Scheme. Hence, argued that the interest waiver is allowable business expenditure u/s 37(1) of the Act. The Ld.AR further submitted that the interest was included in the assessee's income and the recovery part was never included in the NPAs. 7. The Ld.AR further submitted that the waivers were actual and written off in the assessee's books of accounts. The assessee has actually written off the entire amount in the books of accounts and the amount was not recoverable. The assessee furnished resolution of Board No.9 dated 23.09.2010 and the Guidelines of APCOB in page No.70 of the paper book. 8. We have heard both the parties and perused the material placed on record. As per the ADWDRS- 2008 scheme, out of the loan waiver, principal and interest upto the date would be reimbursed by Government in case of small and marginal farmers but the scheme does not cover the penal interest, other charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the AO With regard to the provision of claim for bad debts and NPA no specific finding was given by the AO/CIT(A) with regard to the actual claim made by the assessee in the earlier years. In a nut shell, the assessee should not claim double deduction under the waiver scheme as well as the exemption of the income or bad debt for the same amount in the earlier years. Therefore, this issue needs detailed verification at the end of the AO, hence, we remit the matter back to the file of the AO to allow additional relief of 25% OTS after verifying whether the assessee has claimed the exemption of the same income in the earlier year or made double claim in the earlier years with regard to bad debts or NPA and decide the issue afresh on merits. The AO should give reasonable opportunity to the assessee before deciding the issue and the assessee is directed to furnish the details. Accordingly, the appeal of the revenue on this ground is remitted back to the file of the AO for fresh consideration and this ground is allowed for statistical purpose. 9. The next issue is related to the write off of amounts under the schemes announced by the APCOB and KDCCB. The AO found that during the F.Y., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... waivers and relief schemes, was already provided by way of provisions which are present in the balance sheet of the assessee's bank. The assessee had enough provisions for bad debts and its reserves in the balance sheet to cover these waivers and relief schemes announced by APCOB. Therefore, the assessee's argument of business expediency was rejected by the AO accordingly disallowed the claims made by the assessee and added back the sums to the total income of the respective Assessment years. 11. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) deleted the addition made by the AO following his own order of the earlier years, and the decision of Nizamabad District Cooperative Central Bank Ltd (supra). The Ld.CIT(A) for the A.Ys 2013-14 and 2014-15 also followed the decision of this tribunal in assessee's own case in ITA No.120/121/Vizag/2013 dated 08/11/2017 and accordingly deleted the addition. 12. Aggrieved by the order of the Ld.CIT(A), the revenue is in appeal before this Tribunal. The Ld.DR argued that APCOB has promulgated the schemes for write off of penal interest on IOD and interest on overdue fish feed loans and interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alid claims from them. The Ld.AR stated that APCOB granted interest relief to such borrowers who are not benefited by the ADWDRS- 2008, those who repay the outstanding loan are given interest relief and relief is borne by APCOB, DCCB, PACs. The Ld.AR argued that the amounts written off were actuals and written off in the books. The Ld.AR also submitted that that all the issues are covered by the order of this Tribunal in ITA No.120& 121/Viz/2013 dated 08.11.2017.Hence no interference is called for in the Ld.CIT(A)'s order. 15. We have heard both the parties and perused the materials placed on record. In this case, the assessee has written off penal interest and waived the IOD as per the APCOB scheme. Similarly, the interest is also waived relating to the loans to fish feed traders. The assessee also submitted that waiver was not part of any earlier provision of NPA or bad debts. 50% of the waiver was borne by the PACs and 50% claim preferred by them to DCCB and the assessee transferred the amount to the PACs by crediting to their accounts. The assessee submitted that all these schemes are identical to the facts of the assessee's own case for the A.Y. 2007-08 and 2008-09 in appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co-op Central Bank Ltd vs. ITO,Ward-2, Hyd (ITA Nos. 905/H/13,906/H/13), the same amount of waiver was held as allowable u/s.37(1). 3. The reimbursement of waivers on penal interest and IOD were explained by way of Circular dt. 7.3.2006 (Copy of the Circular in Telugu is filed in the Material paper Book for AY:2007-08 at page No. 28 and its Translation is enclosed herein as page Nos.61-63, which shows that the impugned waiver was in fact a reimbursement to PACSs by DCCB and APCOB. It got crystallized and quantified only in the relevant previous year and hence the respondent-assessee made the claim for deduction rightly in the relevant previous year, which was duly allowed by the learned CIT- Appeals. 4. The learned AO-Appellant's objection as to the non-allowability of the impugned amount as an expenditure of the relevant previous year as the same relates to earlier assessment years is submitted as not correct, as the concept of "prior period expenditure " enunciated in Acc.Std.5 of ICAI defines the same as " expenditure incurred in a preceding year but omitted to be recorded therein", which is not the case here. All waivers or write-offs invariably relate to earlier yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we hold that the IOD interest and the penal interest should be allowed as business loss and accordingly the appeal of the revenue is dismissed and the order of the Ld. CIT(A) is upheld. The Ld.CIT(A) also deleted the addition placing reliance on the decision of Nizamabad District Cooperative Central Bank for the A.Ys 2011- 12 and 2013-14 and for the A.Ys 20113-14 and 2014-15 the Ld.CIT(A), Vijayawada relied on the decision of this Tribunal in the assessee's own case supra. In the instant the waivers are actual and written off in the books of accounts which fact was accepted by the Ld.CIT(A). The claim of the assessee was in all cases the waiver of interest on over due and sticky loans and the assessee submitted that such interest was never claimed as expenditure in the earlier years. Though there was change in the nomenclature the waiver and written off was interest and stated to be admitted as income in the earlier years. The assessee submitted that there was no double claim made by the assessee. The department did not bring any evidence to show that the assessee has made double claims of the deduction. Since facts of the case are identical to the assessee's own case in appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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